Just consider the sheer geographical spread of the crises of the summer of 1998: Russia defaulted on its debt payments; Japan foundered on the rocks of low consumer confidence; Indonesia was tearings itself apart and Brazil was in trouble again with its bankers, while the Long-Term Management Fund collapsed. Here was a true latter-day equivalent of the notorious South Sea Bubble.
Today the mood is entirely different again. The recovery of market confidence that has seen shares return to their pre-crisis heights has been caused by a number of events, rather than by one single decision, aided by moves by the Tokyo government, the IMF and the US Federal reserve. Above all, perhaps, there has been the resilience and self-confidence of individual American investors, a great many of whom have never experienced a great drop in share values and seemed determined to drive prices back up to previous heights. By this week, they have done just that, with the Wall Street Journal excitedly reporting that "With Dazzling Speed, Market Roars Back To Another New High". Professional advisors and economists, who had cautioned that troubles may still lie ahead, have been confounded and humiliated.
Before we dismiss the thinking of those Bears, however, as too out-of- date and join the stampede of investors pressing to see the Dow at 10,000, 15,000 or even 30,000, let us ask a few awkward questions. The first concerns the extent - actually, the limitations - of the information that American bullish investors, and their equivalents abroad, take into account. This can be no better expressed than by the triumphal statement of Abby Cohen, the chief investment strategist at Goldman, Sachs & Co, who earlier this week stated that what is needed is "to ignore the short-term signals, some of them very loud signals, and focus on company trends". The ominous sound of collapsing societies and polities is thus to be regarded as a "short-term signal", as opposed to the longer-term and more reassuring assessment of stock valuation favoured by the Bulls.
Yet one wonders whether Alan Greenspan himself or the CEOs of really smart multi-nationals like BP and Coca-Cola are sharing this exuberance and cracking open the champagne bottles? This writer suspects not. For the basic fact is that the global political system is distinctly tattered and its social fabric in so many parts of the world is wearing thin. These "short-term signals" may yet come back to haunt us.
Consider just a few reasons why the now scorned bears might have a case. Russia's economy is still in a critical condition and is forecast to shrink by another nine per cent next year. (Question: how far can an economy contract until, like the Cheshire Cat in Alice in Wonderland, it disappears altogether, and what does that mean in the real world of 150 million people?) Russia's leader is clearly close to death, an event that will cause the Tokyo, Frankfurt and other European bourses to tremble as they struggle to understand how the succession problem plays out.
Indonesia's riots suggest the implosion of the fourth most populous country in the world. And in Japan the suspicious citizens appear to have little enthusiasm for going on a spending spree. So, at least three of the five problems that worried policy-makers in September are still unresolved, and two of them (Russia, Indonesia) may be getting worse. Nor have the other issues of earlier this year - arms proliferation, Saddam Hussein's challenge to UN supervisions and President Clinton's battle with his Republican foes - gone away.
The second consideration is the problem of political leadership in this complex, divided planet of ours. The difficulties of the current American President may be sui generis, but they clearly worry all foreign-policy experts, who recall that it was lack of real leadership that plagued the West in the Thirities and the blessed abundance of US leadership that saved things in the late Forties.
Yeltsin's steady collapse may also be something special to Russian conditions, but it does not make for a stable world order. Succession problems also loom in key states such as Jordan, Morocco, Syria and South Africa, and many analysts have long been concerned about the survivability of the present Egyptian and Saudi Arabian polities. Japan exhibits a total lack of leadership, as reflected in the incredibly low public-opinion ratings of the current government. European politicians (with the partial exception of Tony Blair) appear parochial, self-effacing figures; Germany's best- selling magazine Der Spiegel printed on its front-cover last week "Where is Schroeder?" in protest at this lack of decisiveness and vision.
Finally, and most importantly, one needs to take into account the groans and creaks of a deeply troubled developing world, noises that suggest to ecologists, demographers, human-rights experts and plain old military strategists alike that all is not well, and that existing political structures in many regions may not be able to bear the strains of too-rapid modernisation.
Separatist movements across the globe, in Mexico, India, the Balkans, are trying to escape into their own fiefdoms. The youth unemployment rate in every city along the North African littoral is around 50 per cent or more. Most of the nations that supply our oil and gas supplies are, literally, social and political powder kegs. And it is towards those countries that a vast flow of armaments, both sophisticated and crude, is pouring.
Then there is the awful reality of "North" and "South" that simply will not go away. During the Fifties and Sixties, the income "gap" between the world's richest and poorest countries was closed, although obviously by an insufficient amount; but more recently, the gap has opened up again, horribly, ominously.
Do we really want to go into the 21st century with the average North American and European enjoying 200 times the income of the inhabitants of Rwanda and Haiti? Do we think that makes for a nice, stable world?
In October 1930, a year after the Wall Street Crash but before the Manchurian crisis and the Nazi seizure of power, the Economist surveyed global problems and concluded: "The supreme difficulty of our generation... is that our achievements on the economic plane of life have outstripped our progress on the political plane to such an extent that our economics and our politics are perpetually falling out of gear with one another. One the economic plane, the world has been organized into a single, all-embracing unit of activity. On the political plane, it has not only remained partitioned into 60 or 70 sovereign national states, but the national units have been growing smaller and more numerous and the national consciousnesses more acute. The tension between these two antithetical tendencies has been producing a series of jolts and smashes in the social life of humanity... "
History never repeats itself exactly, and we always learn something from the past. But there are some of us who find troubling echoes of the Economist's worries in today's world and doubt that, despite Wall Street's recent euphoria, we shall escape some further jolts and smashes in the social life of humanity in the years to come. We are still dangerously close to the brink.
The author is director of international security studies at Yale UniversityReuse content